infrastructure

When Cyclone Phailin struck the Indian states of Odisha and Andhra Pradesh last week, the predictions were dire. In 1999, a cyclone of comparable strength took 10,000 lives.

While Phailin affected up to 8 million people, leaving approximately 600,00 homeless, death tolls are currently estimated to be in the low double digits. What made all the difference between 1999 and today? A much improved early warning system, effective evacuations, and the construction of shelters probably played a crucial role. Credible forecasts and early warnings were available for several days before landfall, and close to one million people were evacuated.

Everyone who still thinks disasters are ‘natural’ should stop and consider this for a minute. This difference in impact is a real world example of an analogy discussed at the 5th Resilience Dialogue on Oct. 11, 2013. Here’s my interpretation:

It should be celebration time for public-private partnerships and other forms of private investment in infrastructure. The pent-up demand for infrastructure in the developing world has never been greater—over double the $900 billion per year being spent now, according to our rough estimates; and governments around the world are falling over themselves to show donors, strategic investors and creditors alike how committed they are to attracting private investment to infrastructure.

Somehow, as we release the 2012 data on private participation in infrastructure (PPI) across the developing world [see: PPI Database], I just can’t get myself to pop the champagne. True, the march into higher levels of investment, uneven as it is, continues. Commitments for PPI totaled $182 billion in 2012 and most developing countries clocked in with at least one private investment. But the total is still less than 20 percent of what the developing world is spending on infrastructure, and less than 10 percent of what is needed to reach growth targets. It is still less than one percent of GDP for developing countries.

If you saw how poor I was before, you would see that things are getting better.

When I hear stories like that of Jean Bosco Hakizimana, a Burundian farmer whose life was transformed by a cow, I get excited about the change we can all make. Jean Bosco’s income is improving, his kids are eating better, his wife has some nice clothes, and his manioc fields are yielding better harvests — all thanks to the milk and fertilizer from this one cow.

A similar story is playing out in more than 2,600 communities across Burundi, offering new life to a people once decimated by civil war. These community agricultural programs sponsored by the International Development Association (IDA), the World Bank’s fund for the poorest, show that development doesn’t have to be that complicated and that collective effort can make all the difference.

In community-driven development (CDD) projects, communities that have been given control over planning decisions and investment resources for development often decide to undertake small-scale infrastructure projects, such as rural roads, small bridges or schools. A project in Benin has demonstrated that schools built by communities can be built faster at lower cost than those built by outside contractors.

An assumption behind CDD is that communities with local knowledge of resources and environment are better positioned to figure out the best way to build their own public infrastructure in their interest. Indeed, there is some evidence that community-built infrastructure can be cheaper when compared to infrastructure built by government or outside contractors (for example, Wong (2012) introduces several cases of “CDD’s cost effectiveness as compared to equivalent works built through other government service delivery mechanisms”).

However, much of the available evidence comes from a comparison between “community-built infrastructure” and “other-entity built similar infrastructure” constructed at a different time. It is difficult to find, or to set up, an experiment where a set of identical infrastructure projects are built by both communities and others at the same time under similar conditions, and in numbers large enough to allow for comparison between outcomes.

Despite the volatility of Armenia’s economy in the twenty years since the country gained independence, effective government reforms led to double-digit growth rates from 2001 to 2007. That ended with the global financial crisis in 2008.

Yesterday in New York I attended a discussion on infrastructure in Africa. As co-author of the Africa Infrastructure Country Diagnostic, I've been talking with people for years about the importance of reliable infrastructure for economic and social activity in Africa. Today we're talking about how infrastructure can help achieve the Millennium Development Goals (MDGs).

The core of the MDGs is poverty reduction and improved human development, but how can those goals be met without basic infrastructure to create economic opportunities and support public service delivery? This is a critical question when you think about the facts that 30 Sub-Saharan countries have a power supply crisis, their road freight moves as fast as a horse-drawn cart, and less than 5 percent of agricultural land is irrigated. Although Africa’s infrastructure needs may look daunting, countries like China have shown that it is possible to deliver on the requisite scale.

At the launch, World Bank Africa Chief Economist Shanta Devarajan explained that, "although Africa was the hardest hit by the crisis, its recovery has been so remarkable that we could be at the beginning of what history will describe as Africa’s decade."

The outlook isn't all rosy, of course. With the global financial crisis halting the steady rate of growth in the region, Africa will now likely miss most of the Millennium Development Goals (MDGs) by their 2015 deadline, despite the remarkable progress. n estimated 7-10 million more Africans were driven into poverty and about 30,000-50,000 children died before their first birthday because of the crisis.

Flanked by the finance and development ministers of France and Germany, World Bank Group President Robert B. Zoellick launched two initiatives today that together are expected to mobilize more than $55 billion in financing for infrastructure projects over the next three years.

There is no doubt infrastructure plays a huge role in economic growth and development, Zoellick said.

“In this crisis, we will need more and more to identify creative ways to mobilize additional financing. This facility sends an important market signal,” encouraging the private sector to continue infrastructure investment and development.

France and Germany became the first to sign on to the Infrastructure Crisis Facility with commitments of about $660 million through German development bank KfW and roughly $1.3 billion through French development bank Proparco.

INFRA is designed to help countries offset the negative effects of the financial crisis on their infrastructure services and investment programs, with up to $45 billion available over the next three years. Assistance will be global, but Africa is expected to see a large share of the funding.

The Infrastructure Crisis Facility, administered by IFC, a private sector branch of the Bank Group, is expected to attract more than $10 billion to help bridge the infrastructure financing gap.

At today’s signing, German Development Minister Heidemarie Wieczorek-Zeul appealed to industrialized countries to support the initiative and take into account the situation in developing countries. “They’re not responsible for the crisis. We have a special responsibility to be at their side.”

French Finance Minister Christine Lagarde added: This is a time “when we can put our money where our mouth is and commit to deliver…I think the World Bank has done an outstanding job dealing with issues that are difficult. This is a good illustration of how projects should be conducted. They should be focused where they can actually make a difference.”

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On a related note, I caught up earlier today with the Bank’s director for energy, transport and water, Jamal Saghir, who said the Bank’s Board has approved $9 billion in infrastructure projects already this fiscal year. That puts the Bank 47 percent ahead of the amount of infrastructure funding approved this time last year.

Saghir gave a shout-out to staff, who he credited with working hard to speed up project implementation to respond to the crisis.

Speaking at a news conference this morning ahead of the start of the World Bank/IMF Spring Meetings, Bank President Robert B. Zoellick hit on the need to address the second and third waves of economic fallout being felt in developing countries.

“First and foremost we need to ensure that we don’t repeat the mistakes of the past. When financial crises hit Latin America in the 1980s and in Asia in the 1990s…basic health, nutrition and education budgets were cut back severely. This time we must ensure that governments can protect targeted social expenditures and finance effective safety nets,” Zoellick said.

Nor can infrastructure be neglected, he said, citing the long-term negative consequences of slashing infrastructure investment during past crises. To help promote investment in roads, electricity, telecommunications, etc.--as a means of creating jobs and spurring economic growth--Zoellick said the Bank is planning a massive infrastructure initiative, to be formally launched on Saturday.

Zoellick also highlighted the Bank’s plans to boost support for agriculture—increasing lending from $4 billion in 2008 to $12 billion over the next two years to help ensure food security.